Abstract
We undertake the first examination of price discovery within the European markets for coal, natural gas and crude oil. Short-run return dynamics are analyzed using a regression approach similar to Fleming, Ostdiek and Whaley (1996), while the permanent contribution of securities to long-run price equilibrium is examined by calculating Hasbrouck’s (1995) information shares. Brent crude oil futures display greater price discovery than a proxy for the physical Brent market, while there is evidence that West Texas Intermediate futures still dominate price discovery globally. In natural gas markets, monthly expiry UK natural gas futures display greater price discovery, though weak links to the crude oil market remain. Due to a lack of liquidity and transparency it remains difficult to distinguish between coal securities.
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